On previous occasions, we have talked about the importance of avoiding bankruptcy and how it is called a last-resort mechanism and should only be used when the situation has no solution through other financial means; such as debt consolidation, debt negotiation or debt settlement.

Today, we would like to show people who are seriously thinking about filing for bankruptcy how it is possible to avoid it just by sketching contingency plans and learning how to change damaging spending habits that are one of the main reasons for bankruptcy.

In order to avoid bankruptcy, you as the owner of your assets, will have to make a list of all your valuables that can and should be taken into consideration. Remember to only add items that their value exceeds the $60 mark. Anything goes, from works of art to expensive and modern appliances. This way you will have the chance to evaluate all you possessions and at the same time, you will be able to classify what can be sold, the selling price and if it is already yours, meaning that you might still paying some of the items from the list.

At first, this measurement may be harsh but it is necessary; anything to avoid bankruptcy.

“Lynn” is following some important, sound advice. In order to avoid bankruptcy, he started making a list of all his possessions. He just realized that he liked to buy electronic gadgets that he actually did not need. By doing this, he learned that he was overspending on things that were very expensive and not quite essential for his living. He did it because of advertising campaigns and fancy T.V. commercials.

One bankruptcy specialist, Martin Rogers will show Lynn and us how to avoid bankruptcy by making a few changes and wisely planning how to spend money.

Lynn:
What do I have to do to avoid bankruptcy?

Martin Rogers:
In order to avoid bankruptcy, I am going to make a list of recommendations to ease the avoidance.

1. Figure out the main reason why your debt problem began.

Although people may think that those who file for bankruptcy are always compulsive buyers or irresponsible people, they may be wrong because sometimes you may fall into the hands of debt due to illness, divorce; loss of job, etc. But the important thing is to learn how to avoid this type of situation once and for all. The chief point to avoid bankruptcy is to determine the source of the problem and develop a contingency around it.

2. Determine the priority when the paying begins (or the paying priority)
Sometimes people think that to successfully avoid bankruptcy they have to keep their debts current by continuously paying each and one of them. But the truth is, that this way you will only make your current situation worse. That is why you need to organize your payments and prioritize them. I recommend first making the rent or mortgage payment and utility bills. Be very careful with the bills that have law penalties. To avoid bankruptcy does not mean to be homeless or live by candlelight.

3. Outline a budget

If you consider yourself to be an organized person, you can stick to a budget and surely this will get you out of debt. But the important thing to avoid bankruptcy is to design the budget well; not only make promises to yourself that you will not be able to keep. Instead of helping you, those kinds of goals can increase your debt and deliver you into the hands of bankruptcy.
A nice balanced budget can lighten your situation and free you from debt.

4. Selling your goods to avoid bankruptcy

Whenever you need quick cash, selling your goods can come in handy. Said handy list I mentioned earlier, can help you make decisions on which belongings to sell first and which ones to keep.

5. Ask for a Home equity loan

By exchanging your mortgage to receive a new one, can help you lower the interest rate or prolong the time of payment. You can end up with some extra money every month that can be used to pay more debts. The home equity loan is another mechanism to avoid bankruptcy, which is where you get a loan backed by your house, but can only be used if the property is already yours.

6. Cut off daily expenses

Although there are people who think that the morning espresso has no effect on their pocket, it really does. Behind the espresso the little doughnuts follow and the usual croissant. These usual and small expenses add up to big amounts of money monthly. Avoiding bankruptcy means to cut down as many daily expenses as you can and notice the difference in a couple of days.

Lynn:
Can I still support myself by paying only the minimum?

Martin Rogers:
Avoiding bankruptcy is not an easy task, but if you find that you cannot afford to pay more than the minimum each month on credit cards, mortgages, or other interest accruing loans, you may need to consider changing strategy.

When you pay no more than the minimum on a monthly basis, you are really not doing yourself any good and you will not avoid bankruptcy. The interest will continue accumulating, and eventually you are not even paying on the principal any more. All you are really paying is the interest. When you do this, you are just keeping yourself afloat financially.

To avoid bankruptcy means to do more; you will never really pay off the debt if you continue making payments like that. You may even be paying the same debt, ten or more years down the road.

Avoid bankruptcy and become debt free once more. If at the end of this process you do not feel that can avoid bankruptcy, remember to seek professional counseling.

*Disclaimer-this is in NO WAY meant to be legal advice or counsel. Please seek professional help when determining a course of action for your personal situation.